News

# Ballard Reports Mixed Results for Q3 2012

November 04, 2012 by Jeff Shepard

Ballard Power Systems announced its consolidated financial results for the third quarter ended September 30, 2012. The third quarter 2012 highlights in comparisons to 2011, revenue was $14.2 million in Q3, representing a decline of$6.4 million and $38.0 million year-to-date, a decline of$17.0 million reflecting reductions in fuel cell products and material products, along with the 2011 wind down of contract manufacturing.

Within fuel cell products there are signs of increasing sales momentum, particularly in the communications backup power segment. Adjusting for contract manufacturing, which wound down in Q3 2011, total revenue increased $0.5 million or 1% year-to-date and Fuel Cell Product revenue decreased$0.4 million or 4% in the quarter and increased $5.9 million or 28% year-to-date. Fuel cell stack shipments were 876 units in Q3, a decrease of 13% and 2,241 units year-to-date, a decrease of 4%. The twelve-month rolling order book was$50.2 million.

John Sheridan, President and CEO said, "Weak sales and revenue continued through the third quarter, against the backdrop of a challenging economy. As reflected in our revised guidance, supported by a recent strengthening in order activity, we expect stronger Q4 revenue. Also, we expect continuation of the improving trajectories in cash operating expense and cash flow."

Recent commercial developments included progress in relation to acquisition of key fuel cell assets from IdaTech for the communications backup powermarket, including purchase orders from Cascadiant Inc., Inala Technologies, PPA and other distributors, and total shipments of more than 150 ElectraGen™ systems. An ESA was signed with First Element Energy for provision of FCgenTM-1020ACS fuel cell stacks to be used in communications backup power systems. Confirmation of funding support was received from the European Joint Technology Initiative (JTI) for a 1 megawatt (MW) ClearGen™ distributed generation system to be deployed with a major gas supplier. The commissioning of a 1MW ClearGen™ distributed generation system at the Toyota headquarters office campus in Torrance, California was completed.

Gross margin was 14% in Q3, a decline of 5-points, driven by low product shipment volumes despite continuing reductions in product costs. The year-to-date gross margin of 17% represented a decline of 1-point while cash operating costs of $7.0 million in Q3, an improvement of 24% and$24.4 million year-to-date, representing an improvement of 20%, was consistent with the Company's expectation for full year cash operating costs in the low $30 million range. The company reported adjusted EBITDA2, excluding a$1.6 million restructuring charge in the quarter, of ($3.9) million in Q3, an improvement of 22% and ($15.0) million year-to-date, an improvement of 19%. Net income was ($9.0) million or ($0.10) per share in Q3, a decline of 28% and ($24.0) million or ($0.28) per share year-to-date, an improvement of 8%.

Cash used by operating activities of $1.3 million in Q3, an improvement of 86% was driven by lower working capital requirements of$10.0 million and partially offset by an increase in cash operating losses of $2.0 million. On a year-to-date basis, cash used by operating activities was$27.6 million, an improvement of 26%. Cash reserves of $23.1 million or$13.7 million net of $9.4 million outstanding on the company's bank operating line. As announced on October 9, the Company has adjusted guidance for the full year revenue downwards to approximately$60 million, based on a preliminary estimate of Q3 revenue together with the Company's updated outlook for Q4. Adjusting for the absence of contract manufacturing in 2012 versus 2011, revised guidance represents year-over-year growth in revenue of 3%, and 19% in the Fuel Cell Product segment.

The Company has adjusted guidance for full year Adjusted EBITDA downwards to approximately (\$18) million, based on a preliminary estimate of Q3 revenue together with the Company's updated outlook for Q4. Revised guidance represents year-over-year improvement of 19% in Adjusted EBITDA.